Indonesia: Proving bad faith of a distributor in a trade mark cancellation

Many foreign trade mark owners rely heavily on their local distributors to get their products distributed in the Indonesian market and sometimes place too much trust in them considering the local distributors' local knowledge of the market. Consequently, some unfortunate cases can occur where the distributors take advantages of the rightful trade mark owner's lack of protection and seek the registration of the trade mark in their own names, without obtaining the trade mark owner's consent. This is done in the hope that once the distributorship ends, the existing registrations may serve as their leverage in seeking opportunities to continue selling.

With the first-to-file trade mark registration system, challenging a trade mark registration by a distributor at the Commercial Court could be difficult. The judges' standard practice in assessing bad faith elements would be to rely on earlier trade mark registration details in other countries, possible public confusion and the degree of similarity. Where the trade mark owner is claiming well-known status, relevant evidence of extensive use of trademarks is also required. Subsequently, relevant circumstances relating to the filing of a trade mark (such as prior knowledge or distributorship arrangements) may become secondary from the panel of judges' perspectives.

However, things may change for the better for foreign trade mark owners. In a recent trade mark cancellation case involving the holder of a well-known mark and its former distributor in Indonesia, the panel of judges at the Commercial Court affirmed that the meaning of bad faith filing under the Trade Mark Law should also encompass the filing of a trade mark by a local distributor without consent from the rightful trade mark owner in a foreign country.

In its consideration, the panel of judges assessed the distributors' bad faith intention, and found that relevant provisions of the Paris Convention affirming that trade mark owners are entitled to cancel the unauthorised registration of their local agents/representatives should apply. The panel of judges also reviewed the distributorship arrangement (including the letter of appointment, purchase receipts and relevant correspondence) along with the evidence of registrations and use of the well-known trade mark, before finding in favour of the trade mark owner.

Although the recent Commercial Court decision may be seen as a positive development, as best practice it is always advisable for foreign trade mark owners to secure trade mark registrations prior to entering into the Indonesian market. Moreover, it is also advisable to have relevant provisions in the distributorship agreement or licence agreement with the local parties prohibiting them to file any similar or identical trade mark registrations.

Daru Lukiantono	Raja Mada Silalahi

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